Last week, the New Jersey legislature announced its plan to repeal estate tax by January…
New Trust Law Enacted in New Jersey
On January 19, 2016, the New Jersey Uniform Trust Code (NJUTC) was enacted into law. The new law will take effect on July 17, 2016. The new law, based in part on model legislation prepared by the Uniform Law Commission, supplements and revises New Jersey’s existing laws concerning trusts. Many of the provisions of the new Uniform Trust Code are default rules that will only apply if the provisions of the trust instrument fail to adequately address a particular issue.
Below are a few significant provisions of what the NJUTC does:
- Establishes new specific rules of trusts that are not subject to override in the trust’s terms.
- Establishes that upon reaching the age of 35, if a beneficiary becomes aware of the trust, the trustee must provide the beneficiary both the trust instrument and information regarding the investment and management of the trust if requested by the beneficiary.
- Establishes rules concerning trust modification and termination which allow greater flexibility and special rules relating to revocable trusts.
- Clarifies and affirms the ability to establish Special Needs Trusts for individuals with disabilities and strengthens the protection against creditors’ attempts to reach the assets held in a Special Needs Trust.
- Establishes a means of determining which jurisdiction’s law governs a trust and location of a trust’s principal place of administration.
- Enables the non-judicial settlement of trust accounts and other matters related to trust administration; provided, such action is not contrary to a material purpose of the trust or public policy. This eliminates the need to go through the cost and delay of seeking court approval for action such as (a) interpreting the terms of a trust; (b) approving a trustee’s accounting; (c) approving or restraining an action of a trustee; (d) approving the resignation or appointment of a trustee and determining a trustee’s compensation; (e) transferring the principal place of administration of a trust; and (f) establishing trustee liability for an action related to a trust.
- Defines who may represent and legally bind another individual in matters related to the administration of a trust.
- Establishes the method for creating, modifying or terminating a trust, including, but not limited to allowing for the modification or termination of a trust even if the trust has a spend thrift clause (limiting creditor access to trust assets) and allowing for the modification or termination of a trust if the trustee and beneficiaries agree (the settlor does not have to agree).
- Establishes detailed rules in connection with the representation of beneficiaries.
- Establishes the duties of a trustee and how a trustee is appointed, declines appointment or is removed. For the most part, the NJUTC restates current law. However, it does make a few changes. For example, it clarifies the relationship between a trustee and investment advisor and the responsibilities of each to direct and manage the trust assets.
The NJUTC applies retroactively, with some limited exceptions, to trusts created before, on or after the effective date. As a best practice, many trusts drafted by our law firm have already addressed many of the benefits provided by the NJUTC. The new law may necessitate a review of an old estate plan.